Less than a week before the presentation of budget 2008, finance parliamentary secretary Tonio Fenech, participated in the EU’s Economic and Financial Affairs Council (Ecofin), which particularly focused on ways of improving financial and economic stability in the EU-27.

Speaking to The Malta Independent from Luxembourg, Mr Fenech said the council discussed the need for an economic stability and growth pact, which would enforce certain responsibilities on member states, so that deficits would be eradicated and economic growth improved.

Referring specifically to Malta’s situation, Mr Fenech said that by the end of this year, the country’s deficit would amount to 2.1 per cent of GDP and this was expected to go down to 1.2 per cent of GDP next year, meaning a reduction of Lm20 million / EUR46.6 million.

Enough income would then be generated to introduce a number of measures, he said, adding that it was always important to be cautious.

Mr Fenech referred to the opposition’s suggestion to cut the surcharge on utility bills by half. He said that since the Labour Party had not specified how it planned to finance this Lm25 million / EUR58.2 million proposal, it was obvious that it had to be financed by additional taxes.

Mr Fenech said the stability and growth pact would establish a framework that would ensure more transparency.

“Our budget will now be overseen by the EU and the international community, so this will automatically enforce certain responsibilities we will have to abide by,” he said.

The Ecofin council discussed the national reform programme, which addresses means of enhancing economic competitiveness. He said the government was in the process of putting together a document outlining the targets that the country aimed to reach by 2012.

Moreover, the council also discussed ways of responding to the reality of globalisation, a measure referred to as “flex security”, said Mr Fenech, adding that while ensuring flexibility of the labour market, the idea was to protect workers who lost their jobs.

Additionally, the council set out a road map to increase bank transparency in order to put clients’ mind at rest.

In this regard, the EU was looking towards more supervision of the banking sector, as well as credit rating agencies.

EU regulators have already ordered a probe into how much responsibility credit rating agencies – Standard & Poor’s Corp., Moody’s Investors Service Inc. and Fitch Ratings – bear in the credit crisis, saying officials needed to look at possible conflicts of interest, because the agencies were paid by the banks whose debt they rated.

French Finance Minister Christine Lagarde suggested that Europe might itself need to supervise rating agencies, since they currently faced oversight only by the US Securities and Exchange Commission.

Finance officials from the United States, Japan, Canada, France, Germany, Britain and Italy will meet in Washington from 19 to 22 October, to discuss how the sub-prime crisis has affected the global economy and to talk about ways to beef up the scrutiny of financial markets.

Britain got the all-clear from EU colleagues as they lifted a caution imposed last year, when its budget deficit went over the three per cent limit. Ministers said, however, that Britain had only taken “a rather modest path” to improve the way it manages public finances.